Gold Leasing: The Case Of The Disappearing Gold

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.

But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:

If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.

If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.

If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.

That’s quite a bit of risk.

In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.

So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.

The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”

For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.

Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”

If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.

However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.

What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.

So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.

All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)

If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day after a run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)

We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.

In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

I had hoped that you were going to stay on the wagon and give the JOOOOOOs thing a rest for awhile. And you were actually doing pretty good there for about a week. You're intelligent, and I enjoy your posts when they aren't about the evil and wicked JOOOOOOOs

You had to send the French Navy to NY to get it though. The American Navy has been reinforced since then. You won't get away with that again.

" Starting in 1958, he ordered the Banque de France to increase the rate at which it converted new Dollar reserves into bullion; in 1965 alone, he sent the French navy across the Atlantic to pick up $150-million worth of gold; come 1967 the proportion of French national reserves held in gold had risen from 71.4% to 91.9%. "

The Arsonist (and of course the building owner) usually are the only ones that make it out alive, the rest? they will all be found piled up at the inswinging doors. There is a reason fire exit swing out and there are no fire exits in this world financial building. Jewish Lighting, go ask your Fire Marshall what it is.

This shows the location of the allocated gold, i.e. ownership of specific bars of physical gold ("Lagerstellen"), as well as the unallocated, i.e. gold claims ("Sichtkonten"), gold on lease ("Goldleihe") and gold swapped out ("Swaps").

Merkel: Ship it now, please. If not, we'll dump our dollar reserve and buy twice the amount in the market.

You know what? Timmy will call FedEx before you can say GLD Puke. This is why.

Although some sources always claim the Fed could "confiscate" the European gold, this is a non-threat, simply because the US dollar has its international position only thanks to massive European goodwill. They can sink the dollar at any time.

All well and good, but that doesn't really answer the question. Why the seven years? Presumably, since the Germans have such leverage, they're only letting it take so long because they want to. But why? If the gold is really there, then why not just ship it over and have done with it?

Cause it doesn't matter. The US government cannot afford to cheat, and so why care?

Recall that the Bundesbank shipped some 930 tonnes from London to Frankfurt in 2000 and 2001, and they didn't tell anyone for a decade (it came out last fall when they published where their gold is stored).

So if they now make a fuss about 50 tonnes, then the point is the fuss rather than the 50 tonnes, no?

1993-1999 Europeans support the dollar gold market in order to preserve the international role of the dollar (lowers the oil price, too, making them less dependent on said dollar)

2000-2012 Europeans wind down their support of the paper gold market. Open leases are closed.

Paper gold was nicely supported during 2000-2011. The rising price made sure there is enough physical gold to go around. Why? The flow of physical from mining and scrap is roughly constant in terms of weight per time. The demand for gold as a store of value is roughly constant in terms of dollars per time (up to the slow increase of world GDP in dollars). So the higher the London price, the longer the available physical lasts.

One might think the support (=someone pushed it up) of the London gold price ended in fall 2011. If they now leave the market alone, the price of paper gold might drop quite a bit, perhaps under $1000 per ounce, but at some point something will break as the market runs out of (physical) reserves.

Mr Huxley, the game is still in play, note the Euro/Dollar war(plus Yuan/CAD/+...?) (someone mentioned this here, earlier). No need to repatriate all, maybe darned ole' US neo dollar may be the winner, who can know? Leave the gold there(in the USA), though it's a relic, you're told, to them it's money, a reserve asset . p.s. Remember, some say(see Creature from Jeckyll Island) it's a cartel, and FED is the biggest dick in the room, for now... Bunds, schmunds, do as you're told.

If you haven't noticed, the euro and dollar are at war, and gold is one of the main weapons.

What possible action could the bundesbank have taken that would invite more notice and speculation. The only other is asking for everything immediately...but that would crash the gold market immediately and they would be blamed. This is a nice strategic move.

Why would asking for immediate delivery of all the gold crash the gold market, assuming that it's actually there in the NY vaults and not leased to anyone? The Germans already own the gold, so nothing changes ownership, it's just a matter of transport logistics. Right?

Now if the gold WASN'T there anymore, if asking for it all back would force the US to go buy some in the open market, or else mine it pdq, THEN I can see why it might have an effect on the markets. Is that your position?

Because of the panic it would create. It would show an extreme lack of trust at international level between some of teh most powerful entities that exist.

To others it would imply that the Bundesbank knows something they dont ( true most of the time anyways) and perhaps expect imminent collapse. That will send others scrambling for gold, even if there was no reason for panic (and the huge paper gold versus rela gold ratio is reason enough for panic NOW).

That would break the market. Even though the Bundesbank would get every ounce from the Fed, just this action of asking will break things.

The dollar was destroyed in the 1970s when the US asked the Shah to hike the oil price.

It got so far (until today) only because the rest of the world decided (around 1978-1980) to support the dollar even though they hated it, simply because they didn't hve any other international currency to settle international trade and nobody could afford to have the dollar fail.

This changed with the birth of the Euro around 1999-2002, and you can see from the dollar gold price that the world doesn't need the dollar any longer. Well China decided that they did, and they supported the dollar for another decade, roughly 2002-2011.

As far as I understand it, the dollar has been in limbo since the fall 2011, just stabilized by hot money investment flow.

You see it limbo, I see it in free fall since 2002. The dollar is being sold off, euro is being bought but it's in equally terrible shape. Recently all the central banks have been racing to print fiat while also buying universal money, gold and silver. That's a fact. There is a global debt crisis. Maybe the entire debt based model is flawed. I'm not sure we even need a world international currency at all.

The Euro is in good shape. This is because no government can force the ECB to print. And they won't print more than what's necessary to meet their inflation target of just below 2%. It is true that a number of governments have incurred too much debt, but hey, governments can be bankrupt (Greece), but why wouldn't people still accept the Euro? What matters for accepting Euros is that its real value doesn't decline too rapidly and that the small decline from inflation is predictable.

Internationally, the Euro won't decline too much either because the Euro zone has a structurally balanced trade account. Yes, the hot money flow does affect the Euro +/- some 10 cents, but there is no structural pressure on the Euro exchange rate.

The situation of the dollar is totally different. There is a net foreign dollar position of some $8000bn. If they start selling, it is over. In addition, the U.S. run a trade deficit of about 5% GDP. Unless foreigners accumulate additional dollars at that rate, there will be downward pressure on the dollar.

You can watch all the desperate attempts of the US government to prop up the dollar in the Middle East. They are doing almost everything now in order to raise the international oil price (Brent) although a high oil price hurts their economy as well. But at least it guarantees some demand for dollars.

You make a good point. Lets see how long they can keep proping up the dollar thru Brent. Outside the ECB though, the Germans are still monetizing their banks by buying bonds however, because they need to. Maybe your right, lets see, there's still too many variables for me to make a decision.

Try a guess at what dollar price of oil the new resources are viable? $60/bbl? $70/bbl. The Canadian stuff is cheaper (and also a bit worse). So without the high dollar price of oil, there would simply be no expanded production in North America.

Same story as in the 1970s. The U.S. wanted to become independent of the Middle Eastern oil. With a free market price of oil, this would have been impossible, simply because the Middle East was able to pump at $1.50/bbl at that time and also able to vastly increase production at that price.

So the U.S. needed a higher oil price in order to allow non-Middle East production to become viable. At that time Prudhoe Bay, Mexico, and the British/Dutch/Norwegian parts of the North Sea. Kissinger asked the Shah to help him get the oil price up. Never heard this story?

Here is Sheikh Ahmed Zaki Yamani on CBB (Jan 2011). The video clip is a short version of the interview:

This "Kissinger Plan" is being repeated. It started around 2000/2001. You just need to make sure that no possible other producer (Iraq) can challenge Saudi Arabia's role as the swing producer that has the price setting capability. And then, if there is still too much oil coming from Libya, Egypt, Iran, Algeria, you know what to do.

". . . they won't print more than what's necessary to meet their inflation target of just below 2%."

I have a really nice bridge that I think you may be interested in. Cash only.

The ECB is going to print all the euros it needs to to keep up with the Fed's printing. Otherwise, Germans don't get to sell their stuff and they become unemployed and restless. Remember what happened in Munich when they became unemployed and restless?

The cool thing is that the Euro zone has a balanced trade account. They just stopped playing this game in 1999, and this was one of the major reasons for introducing the Euro. They'll take out their popcorn and watch the currency war on telly.

If you take a look at China's international accounts, they are trying the same, i.e. buying so much real stuff from abroad (not only gold, but even copper) that their trade surplus is reduced.

Eventually it will be (effectively) the U.S. importing oil and the oil exporters receiving dollars with the rest of the world out of the game (as their exports of goods into the U.S. and their imports of energy net out). Then someone will probably pull the plug.

As a safe investment, one could rely on a good performance of gold in times of financial crises and imminent sovereign defaults. But often the price suddenly drops. It does so without visible reason and even when the panic reaches its peak. But why? Dimitri Speck knows the answer. He has examined in detail how central banks secretly manage the gold price with the intention to calm the markets and to control inflation.

There is an even bigger issue behind this manipulating: Since the abolition of the gold standard in 1971 the indebtedness of the global economy is increasing. It has now reached a level which is way beyond comprehension. What are the mechanisms that have led us to this mega bubble? Is it possible to avoid a catastrophic outcome like deflation or strong inflation?

Dimitri Speck’s book “Geheime Goldpolitik” (“Secret Gold Policy”) is about the managed gold price and about bubbles. It is currently only available in German, a Chinese edition will follow. Following the intensive research, the book contains over one hundred mainly unique figures. For the English speaking world, we present here some of the figures together with a short description. The figures depict gold intraday patterns, the amount of worldwide leased central bank gold or the ratio of worldwide total debt to global gdp. The first group of figures is about the gold interventions, the second group is about credit bubbles."

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany.

This is quite obviously nonsense. Take a look at the Bundesbank PDFs above and see that the gold is in NY because they redeemed dollars from their trade surplus under the Bretton Woods system before 1971. The gold is in NY because this is where it was when they bought it.

Sounds reasonable to me. I have this really nice appartment I'm renting that I'd be willing to sell you for half the market price too. Sorry I don't take credit cards, but, Angelo Mozilo has agreed to write you a mortgage if you need it.

If you own allocated gold, then, yes, you get a list of manufacturer, year, serial number, purity and fine weight, for every bar.

As I said, the US needs a lot of goodwill from the rest of the world, and they will not piss off the Europeans. If they did, the dollar would be finished as an international currency. This is what the US cannot afford to, simply becaue they import some 5% of their GDP worth of goods. If foreigners stop accepting dollars, the jig is up.

Look. The U.S. import 5% of GDP worth of goods and services from the rest of the world. The rest of the world delivers all this stuff and accepts US dollars as payment. You better be very very careful with your credibility if you want to continue like this. That's the reason why the U.S. gold and also the foreign gold stored in NY is all there, fully allocated, in physical form, and free of any third party claims.

Everyone knows that gold will be the basis of the next financial system, and this is what the gold is being held for. It would be foolish to waste the gold in order to defend the (old) dollar. A futile attempt. The dollar will fail. This has been inevitable at least for two decades now. It is just that the U.S. government is trying to pocket all possible benefits from the international role of the (old) dollar for as long as possible.

Victor, it's interesting you say this, I too believe there are boat-fuckin'-loads of gold at Knox, NY, etc. WHO owns it? Who owns the dollar note? Deduct fifty points, per question, if you said "The US govt". Now you're asking the right questions

Seems to me, if all the foreign gold stored in NY is all there, fully allocated, in physical form, and free of any third party claims, it would not be unreasonable to allow thorough bar-by-bar serial number inspections with the owners present. Makes one wonder... what are they trying to hide?

They are certainly NOT being very very careful with their credibility!

Why don't the US have a public audit of their gold? Here is how FOA explained it in 1999 - I don't think the argument has changed:

FOA (5/8/1999; 20:16:12MDT – Msg ID:5772)BOE!

[...]The US treasury cannot use gold as a backing reserve as the ECB does, because the BIS would claim it at $41 to settle trade imbalances. They have that authority and as such it leaves the US the only option of outright gold sales. However, with the dollar as “the” reserve currency, we can expect many nations to bid “aggressively” for any US gold. China, among others comes to mind! That is what America found when they tried to auction it’s gold in 1978. The Euro carries no such baggage. [...]

FOA (5/21/1999; 11:27:15MDT – Msg ID:6570)Reply

[...]Just because the US said, in 71 that it would not ship gold any more does not mean the dollar isn’t still a contract to represent it’s old international obligations. Every analysts makes comments like, “let them sent their army if they want it”, but that is simply not the way the world works. It’s cheating, fair and simple! Why didn’t the US send out all of it’s gold at $41 to the ounce, then go off the system? As Another say’s, “think long and hard on that one”!

The entire international financial structure is based on procedure protocols that are not binding, repeat, not binding, but without them, the system will not work. If the BIS did not coordinate inter bank (CBs) transfers the whole system would stop. Using the same “line of reasoning”, the US cannot just back it’s currency with gold at say, $10,000 and start all over again. What manner of “rules of engagement” would prevent them from halting gold shipments again? “Come on”, people of the world are not that stupid!

No, the dollar would have to be totally destroyed, and a new currency, sanctioned by the BIS, and most likely controlled by them, would have to be created. The US will go down to the wire before that happens, therefore, the Euro was created! [...]

FOA (12/19/1999 18:59:35MDT – Msg ID:21368)Reply

[...]I think just about every other major country (outside the IMF / dollar faction) has private audits of their gold. Too date, it’s mainly been the US gold stocks that have worried people because the dollar is so leveraged over this holding. I understand that the gold is intact, but they don’t want to draw attention to it. Any audit only highlights how little gold is backing the trillions of dollar assets. That’s the reason for the stonewall.

Too a lesser extent, any audit carries overtones of eventual dollar backing. Something the BIS would have a major say in as they could attach it at the old $42 rate. Let’s be serious here, if current international law demands the compensation of German slave labour and Swiss Gold value reparations, all hell would break lose for the payment of dollar backed gold confiscated in 71. Both the official and private levels would be after any gold backing our present dollar. The only way the US gold could come into play would be with a new currency. And any whiff of that process (an audit is the beginning) would literally tank the dollar big! Well before the fact. So, good luck to GATA and MR. Turk!

Sure, I get your argument, but again, if they have the gold, why 7 years to return it? You say because it doesn't matter? Then why 7 years, why not tomorrow? If anything, better if Germany takes it back, then there's no risk of the US losing the German gold accidentally, right? Because that for sure would piss off the Europeans - 'Sorry, somebody stole your gold from under our noses, but we're doing our best to get it back for you'...

& besides ~ The Germans aren't very good as 'mechanical engineers'... Shoddy craftsmanship in things like cars & such [/sarc]... How could you ever expect them to build a secure safe?... Much better to bury it underground in a city that gets direct hits from hurricanes & [towelheads ~ COUGH COUGH VOMIT] who fly airplanes into buildings... Not to mention 'donut eating' rent-a-cops who pick off 14 innocent bystanders trying to shoot one perp...

Well one scenario playing out right before our eyes is China,as soon as they have amassed enough Au to back their Yaun the jig is UP.

By default they will become the Reserve Currency,plus a good sign that your scenario has already happened.

With Bernie throwing down 85 Billion a month (because there are no real buyers left), should be the sign we are already there.And CB's laoding up all the Au they can get, plus all the nations wanting repatriation of their stashes from US,pretty much tell me that the goose is cooked, and already on the table.

China,as soon as they have amassed enough Au to back their Yaun the jig is UP.

This argument falls flat on its face at least for two reasons:

1) In order to issue a reserve currency, China would need to run a perpetual trade deficit. They don't and there is no reason why they would in the future let alone why they would want this.

2) Nobody will be so stupid as to back their currency with gold. That would be a dead sure way of either losing your gold or your credibility or both. The U.S. have experienced all these difficulties, and the present shape of the dollar is the result. The Chinese are not that stupid. They understand enough history in order not to copy this stupidity.

That asshole "Mario Draghi", is about to get his rectum torn out/(e/u 1.37) He is going to print and lower rates, but wants a higher base before he does.

Central banks are a joke. That joke of a nationalist leader of Japan "Abe", want's the BoJ under his thumb. I have to give the BoJ some credit.( for resisting) They are 10-15 years ahead of what is going to happen with the Fed. The Fed. shouldn't even exist.

The flows of money moving from Asia back into Europe are astounding! China is F..ked and even the credit ratings agencies are warning. Europe is F..ked, and in a recession, yet the DAX is ramped to all time highs. The sterling is tanking from outflows back into Mainland Europe. Fools/ ( time will tell)

Are there any credible sources for the alleged facts that a) the FED refused an audit of the German gold that it's storing and b) that the FED has leased out (some or all of) this German gold? I don't believe there are..

I'm sort of split on this issue. I think demands from other central banks (other than Germany) are credible. However, Germany may in fact be acting on behalf of the Fed in this instance. The gold basis is decling and hovering near zero as gold has been flirting with backwardation for a while now. Before, to manfacture the appearance of plentiful gold, the fed conned other central banks into selling tons onto the market. This may be the feds final desparate attempt to keep gold in contango in defense of the dollar as the world's reserve currency. Thus, the seven year delay which of course may be shortened as gold nears permanent backwardation. I suspect that gold will be delivered in the next few years or by the end of Obama's current term.

Prof. Fekete has taught me a lot about gold in the past, but the man sees the entire financial economy from a gold perspective. Unfortunately for him and his vision, the 7 billion other economic actors in the world think differently, and it will be a while before these twain shall meet.

I'm a goldbug -I prefer 'bullionair'- myself, but the frequent (and very modest) gold backwardation of the past few years is not caused by scarcity of gold; it's a simple consequence of zero and negative interest rates in treasuries. There used to be an opportunity cost associated with holding gold, to wit, the income that you would otherwise have received from investing your money in treasuries. And so, gold that was to be supplied 'later' would be more expensive than gold that is to supplied 'now'. With ZIRP, that opportunity cost has disappeared, and so the gap between spot and forward rates of gold has decreased and almost closed. If treasury rates should remain in negative territory for long, contango will be the new normal for gold!

I guess you wanted to say that backwardation will be the new normal, simply because nominal interest rates will be less than the negative of the storage expenses.

Yes, I agree. But the effect that Fekete describes will be the same, regardless of the reason for backwardation. Physical will be withdrawn from the exchanges and disappear ino private hands. The (paper) gold futures and forward market will automatically have to develop into a pure spot market. But the spot market cannot support the dollar. Only the swaps can.

Oops yes - backwardation! Well, it was the right word to get backwards :-)

I agree that without government intervention, Fekete will be proved right in the end. I wouldn't worry about the USD and other irredeemable currencies.. at that point, they would be far beyond rescue. That's effectively why the futures trade would have come to a standstill.

Oh, and Fekete's assumption that Germany's gold repatriation was instigated by the FED rings about as truthful to me as the allegation that the FED refused an audit. Central banks know better than to f_ck with other nation's souvereign gold.

Dude, you have to know when you're being brainwashed, which is practically 98% of the time, and when you're not. Never take anything at face value. This little screed is for the dolts out there in never never land that believe anything they hear on TV or read in Time/Newsweek.

You're barking up the wrong tree. As you could have read from my message, I don't buy into unsubstantiated allegations, whether they are from a government, from ZeroHedge or from you. I simply want the facts.

It's very obvious that the world is in a very precarious equilibrium where huge derivatives are cancelling each other. Anyone who has both the intent and capability to destablize this equilibrium will likely be viewed as a trouble-maker and dealt with accordingly.

You go on vacation and hire a housesitter.
when you're gone he sells your house, and rents it back.
You come back, and he keeps paying the rent.
you know shit but why would you? you still get to live in your house right!

and suddenly the new owner come knocking on your door to evict you because he wants to rent the house to his own kids....

now... who's house it it?

Well the law says it's still yours.
the one who bought is doesn't and loses also it's rent.

SO

Not everybody wants to expose the scam because if they know, they'll know their claim doesn't really exist and their rent income is in danger.

SO THEY SHUT UP AND KEEP COLLECTING THE RENT!!

Untill the one who sold the house runs out of money to pay the rent... and then the game is up....

Now you translate that to the gold market.
And you'll understand why nobody really slams on the table to get their gold or money back...

In simple terms, more countries will have to come calling for their gold before this gets out of hand. As it stands now, you have Germany getting their's, Venezuela got their's in 2011, and the Netherlands and Austria are considering asking for theirs.

It'll take a few more big players to ask for their's before the ponzi scheme falls.

This is old-hat and anyone who has any critical thinking skills left in the country already knows the deal. It's a shame that there are tens of millions on both sides of the aisle (as if they were different) who blindly support the bastards without even knowing why.

So glad I bought my 5th round from AMPEX a couple weeks ago, even if the price has gone down a few fiat dollars I'm still happy. Not like I was using those BernankeBux anyway.

Anybody interested in starting an Ex-Pat colony in Paraguay with me? Maybe we can all take Spanish classes together. Land is cheaper down there than in Tennessee or Missouri and the best part is they still respect a man's freedom and privacy.

The price of gold is the paper price. The same physical ounce is sold 100 times. This is how they control the price through derivatives and the futures market. Please tell me how the price could ever escalate to the point it would cause a serious problem for the bullion banks/cartel? When will the price manipulation stop? There's the answer.

Don't you think that large holders of physical know this? The danger lies in countries that produce gold, and large warehoused quantities like sovereigns. The price manipulation is to influence the small investors, should they hold paper or physical, not for producing mines, countries that could confiscate mines or large holders of physical.

"The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK."

I was looking for confirmation that the UK leased out Austria's gold for their own (the UK's) benefit as claimed by the article, while they were only supposed to be holding it for safe keeping. I do not see such in the links you gave.

But there’s more that needs to be factored into the gold equation: government guarantees for bank deposits, for example; which then leads to Mortgage Backed Securities (MBS).

Consider: according to the bank deposit guarantees, if a bank fails, it is seized by the FDIC which guarantees deposits up to $250,000; everything over that is lost.

That’s quite a risk for people and companies with cash positions over the limit.

So, how did/do people and companies protect their large cash positions?

Formerly they used so-called zero-balance checking accounts.During the day, incoming checks would be deposited and checks written would be paid.At the end of the day, the balance would be swept into US Treasuries; or, if there was a net outflow of money, sufficient Treasuries would be sold to keep the account at zero or positive.

From the beginning of this practice, only US Treasuries were used for checking account surpluses.

Soon, there weren’t enough Treasuries to meet demand from people and companies with large cash positions.This is where MBS come in.So now, this surplus cash is kept in Treasuries or MBS.This is reflected on company balance sheets as “cash and cash equivalents”.Go ahead, inspect any corporate balance sheet.

To show their indifference to the "barbarous relic" they treated it as no more than a fistfull of fiat ... look ma .... no hands .... what me care .... I play fast and loose .... with YOUR gold .... sucka ! Monedas is 99+% physical .... the rest is in miners .... kind of a slush fund for condoms !

If I "lease" an apartment I cannot then sell the apartment. For obvious reasons.

Apparently if you are a bullion bank you can "lease" gold and then sell it, despite the obvious reasons not to.

I'm sure the bullion bank is on the hook if something were to go wrong (like Germany wanting their gold back), but still, if someone was minding the store properly then this couldn't happen in the first place.

So if you want your gold shipped back .... no can do .... but if someone leases the gold .... it's shipped lickety split .... so the lessee can sell it ? Germany .... lease 1500 tons of gold from New York .... take delivery .... then default on the lease payments .... problem solved !

Yeah, at some point, they'll be hungry for the same gold they so long disdained .... cross that bridge later .... for now, the greater risk by far .... is to have no gold .... huddled with the hungry masses .... yearning to pee free .... take your pick .... I'll take my chances with gold !

I am not a Joo boy .... I'm a Jew lover .... please, let's be precise ! I saw that video of my Yids .... foolin'around .... I think they were celebrating that they protected their fellow Jews from that twin tower holocaust .... their mandate from their government was to protect Jewish ass .... something, our CIA and State Dept. .... can't even do for themsaelves .... let alone American citizens ! BTW .... they were filmed on video .... but, they were not CAUGHT .... stoopid people get caught ! I am not opposed to marriage between first cousins .... the science is on my side !

Well, I guess they were deported .... but where is the link to the 5 Jews dancing .... I think I saw it once .... your link to Fox news doesn't show it ? I'd like to watch it again .... but it seems to have disappeared ! How many Jews died in the 4 airplanes, how many Jews died in the twin towers, how many Jews died at the Pentagon .... on 9/11 .... you're the conspiracy nut .... that is very relevant data .... to see if Mossad warned Jews not to go to work at the Twin Towers or fly on those planes ! If you knew the terrorists would fly a plane into the Capitol or the WH or the Pentagon or the Twin Towers .... who would you warn ?

The dancing Jews were questioned by Police, then released. They were Mossad who claim to be working for a moiving company. That's a great one. Imagine a Jew working. We instantly know they are lying. Jews don't do manual labor.

You approve of incest? Your are creepy! Your probably married to your 1st cousin or your child perhaps?

I'm fuzzy on all of this. If the Fed loaned out $1B in gold five years ago the lessee would have to repay it at a vastly elevated price. Who would be stupid enough to lease gold and sell it for cash? Or is the same bank placing huge naked shorts to drop the price? Someone needs to explain the whole business model.

jeff - your language is too polite and your circumspection too delicate....the german gold is long gone. others have explained this and providing benefit of the doubt is nothing but a display of fucktardery....i agree that no bank cares to see the charade exposed but the germans were bluntly refused by the fed to even inspect their gold - not once but at least 5 times...the fed told them that the gold is gone and that they would deliver it over a period of years, meaning exactly never....

the germans were fucked by their own bank - db and others who played along with the london gold pool and all of the other nazi schemes of the fed.....why did the germans want to protect their gold when it is such a barbaric relic? - they should have given it to the wall street controlled soviets forthwith and given up all of the worry.

the demand for gold was a stage play where the germans request delivery and the fed promises to deliver to give fake evidence of its existence....the truth, however, is uglier. it is gone gone gone with the wind and down the toilet never to be seen again in german hands....

i won't get into the swiss fraud and their announcements to provide segregated gold accounts which is nothing but muppet talk for i am going to steal your gold you stupid fucking fucktard.....major lawsuits according to jim willie going on in switzerland over stolen gold....the investors are screwed...the nazi courts will bury any ruling coming out of switzerland favoring the gold holders....they can kiss their legal fees goodbye...

I haven't looked into it much, but I remember Silver Doctors had something about it being dicey. Sprott's PSLV, PHYS seem like the safest way to get exposure to gold/silver if one is not going to take phyzz but wants to feel secure about the actual metal backing the trust, but even then to actually redeem stock for phyzz bars seemed like an arduous and expensive proposition with premiums and the sheer amount needed to be eligible to redeem for phyzz. I would just buy phyzz, as having phyzz possession that you can grab and go with is a big part of why it is owned. For trading, I play USLV if I have a good conviction about the price movement as at most a few day trade, then redeem some of those profits for phyzz. I laugh at those who buy SLV then say they are going to exchange their profits made on that ETF for phyzz, as they would have done just as well to not even be playing with fire with paper silver products. They can see first hand that even though it went up, they didn't make any (real) money.

The first paragraph summarizes in % how much bullion and how much is in paper certificate form and cash. Bullion + Certificates = 99.1% of assets, and of this 99.1%, 99.6% is in Bullion and 0.4% in Certificates. The claim for certificates and the cash is for liquidity purposes and to pay expenses and a $0.01USD annual dividend (that apparently allows the fund to be held in retirement accounts).

Second paragraph summarizes how it is held allocated and fully segregated with various vaults across Canada owned by a major bank: Canadian Imperial Bank of Commerce (CIBC). Audited twice annually.

Now, if something happens and CIBC goes down, I don't know what exactly would happen to the gold held in storage, but so far the annuals seem pretty clear and safe... Though I think the banks in Canada are pretty much protected by the government, so not as likely something will happen.

Thanks jonjon. I hold some in my retirement account for the same reasons you mention. I liked the idea of them actually holding 99% + of the value of my investment in physical bullion, and doing it in Canada. Times change, and I just wanted a second opinion.

I'm surprised that some of the larger traders that want a physical gold position don't buy the futures contract and begin to take delivery of physical gold from COMEX. It's been widely advertised that COMEX holds less than 10% of the outstanding gold in the futures contract. If you wanted to influence the price of gold and know that physical gold is in short supply, why aren't any large holders taking physical delivery on gold futures?

Yeah exactly. I don't know the fine details but if I am correct in my understanding, if enough people holding physical gold group together in a concerted effort to buy a large share of futures then demand delivery on them, it should put some serious strain on the central banks basically forcing them to sell off a sizeable chunk of their reserves or get called out for not having it when deliveries don't come. The shortage forces the price higher on the physical or you wind up hoovering out more physical at the current depressed prices from the speculators market. Wash, rinse, repeat.

how can anyone posiibly make money if "sleeping" assets aren't set free to sponsor the bubbles from which all bankers bonuses and without which politiicans couldnt skim off cream for themselves and their buddies in the pork barrel?

The question about this "gold bank run" (or whatever term finally gets used for it) is when it will occur, not if it will occur, right? And then maybe what will trigger it and who will blink in advance of that trigger, thereby fulfilling the prophecy.

The USA/Wall Sreet/FRBNY will steal gold and silver by duping people to buy shares in GLD and SLV. This will accomodate the accumulation of all the PM, by the FRBNY, in one place for ease of confiscation.

The US gov't, through guise and treachery, will allow the NYFRB to, again, take total control of all PM assets; for a fee of course, and solve the dilemma by giving GLD holders $42.222 per ounce for their, supposed holdings and seize the vaults conveniently filled with gold gather from around the planet as they buy gold when dupes buy shares in GLD.

The price of $42.222 per ounce of gold is the notional value as stated by the Treasury Dept, an arm of the NYFRB as outlined in this gov't, Treasury, website:

It's far easier for government to confiscate the gold and silver held by PM dealers, bullion banks and ETF administrators - what's to stop ANY government from doing so? Next step is nationalizing mining companies - then grabbing private holdings in safe deposit boxes (Homeland Security has the right to inspect all boxes in cases of national emergency).

It's lot harder going after individuals - even if you have records (and despite specific NON-reporting language written into the law authorizing production of gold and silver eagles, youreally don't believe they aren't keeping track, do you?). Might be like going after guns - same demographic - people not too thrilled at seeing property rights violated..... But then how much is really left in private hands after you've grabbed the big stores? Easier to control and limit sales driving it into a black market - where 'illegal' sales can be prosecuted and confiscated. But if you get to that point I expect you're in a civil war......